NBF Asset Management Bank v Nasau Ltd [2007] FJCA 48; ABU0067.2006S (25 June 2007)

IN THE COURT OF APPEAL, FIJI ISLANDS
ON APPEAL FROM THE HIGH COURT OF FIJI

CIVIL APPEAL NO. ABU0067 OF 2006S
(High Court Civil Action No. 30 of 2006S)

BETWEEN:

NBF ASSET MANAGEMENT BANK
Appellant

AND:

NASAU LIMITED
Respondent

Coram: Ellis, JA
Penlington, JA
McPherson, JA

Counsel: V Mishra for the Appellant
M Prasad for the Respondent

Hearing: Wednesday, 13th June 2007, Suva
Date of Judgment: Monday, 25th June 2007, Suva

JUDGMENT OF THE COURT

[1] In 1978 Soqulu Plantation Limited was the registered proprietor of land at Taveuni which had been or was being subdivided into a number of smaller allotments to which separate certificates of title were later issued. By a contract of sale dated 7 August 1979 executed under their corporate seals, Soqulu Plantation Limited agreed to sell and Nasau Limited agreed to purchase for $1,100,000 a total of some 198 of those lots. In due course the lots in question were transferred to Nasau Limited. It is now the registered proprietor of some 89 of them.

[2] At some unspecified time after the contract of 7 August 1979, Soqulu Plantation Limited changed its name to Taveuni Estates Limited. By 1995 it was experiencing financial difficulties and on 2 June 1995 it entered into a Deed of Conveyance with its mortgagee, which was the National Bank of Fiji, a body constituted by statute in 1973 of which the appellant is the statutory successor. By that Deed of 2 June 1995 (in which Taveuni Estates Limited and Stinson Pearce Holdings Limited are described as "the Transferors"), the Transferors agreed to release their equity of redemption in the land in return for discharges from the National Bank ("the Transferee") of their indebtedness, together with transfers to the National Bank of various identified allotments in the subdivision having an agreed value of $8 million. That land included Lot 1 on DP 4812, as to which the Certificate of Title is No.28574. A memorial indorsed on the certificate of title 28574 (which is Lot 1 on DP 4812) shows that, following the Deed of Conveyance dated 2 June 1995, the National Bank was on 22 June 1995 registered as proprietor of that land free from encumbrances.

[3] The land comprised in that certificate, consisting of an area of 14 acres 1 rood, is set up as a golf course on which is erected a club house and other facilities used by lot owners in the subdivision. It also has running under or through it various services, such as electric power lines and water reticulation pipes, that connect with and serve individual lots in the subdivision. In the Deed of Conveyance dated 2 June 1995, cl (7) provides as follows:

"The Transferee covenants with the Transferors that the public facilities to be transferred, specifically defined as ...Lot 1 on DP 4912 will remain available for the exclusive use of all Taveuni Estates lot owners and purchasers free of charge in perpetuity."

There is a further provision in cl (8) containing a covenant by the National Bank as Transferee to "preserve" the Scheme Plan dated 3 April 1978. This is evidently the original plan of subdivision of the site; but it seems not to have any immediate relevance to the issues on this appeal.

[4] Nasau Limited claims that the description in cl.(7) of the Deed of the land as Lot 1 on DP 4912 is a mistake for Lot 1 on DP 4812. On the face of the documentary material in the record, this appears to be so; but National Bank disputes that it is a mistake, and Nasau Limited has now (12 May 2006) instituted a civil action No. 209 of 2006 against the Bank claiming rectification of the Deed in that particular. It may be open to debate whether rectification is needed in so obvious an instance. "Words may generally be supplied, omitted or corrected in an instrument where it is clearly necessary in order to avoid absurdity or inconsistency:" see Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420, at 426-427, 437. The matter does not seem to have been determined at the primary hearing, and we observe that it was not the subject of a specific ground in the notice of appeal or in the written submissions of the appellant. In any event, the claim for rectification simply anticipates the equitable interest asserted by Nasau Limited that is claimed as the basis for the caveat to be mentioned later in these reasons. See the discussion in Latec Investments Ltd. v. Hotel Terrigal Pty Ltd. [1965] HCA 17; (1965) 113 CLR 265 by Kitto and Taylor JJ, whose reasoning is analysed at length by Meagher Gummow to Lahone, Equity (2nd ed) at paras 430 to 438.

[5] On 6 May 1998 Taveuni Estates Limited lodged a caveat registered as No.4419430 (the first caveat) in respect of land including the land in CT 28574 being Lot 1 on DP 4812, which is the golf course land. This first caveat was on 2 November 2001 removed by the Registrar acting under s.110 of the Land Transfer Act. On 28 September 2004, a second caveat No. 552370A was lodged, this time by Nasau Limited in respect of the golf course land CT 28574. The Bank, which is the appellant now before this Court, applied by summons to the High Court for an order removing caveat 552370A. The application was opposed by the present respondent Nasau Limited. The application to remove the caveat was unsuccessful, and the Bank now brings this appeal in order to reverse that decision.

[6] The questions to be determined are concerned principally with the terms of the estate or interest claimed, and the way in which it is described, in caveat 551370A; but we think it as well to begin by considering the matter in a more general sense apart from the Land Transfer Act. The appellant Bank submits that Nasau Limited is not a party to the Deed of Conveyance with the Bank and so cannot sue or claim under it. Subject to s.7(1) of the Property Law Act Cap. 130, that is true as a general proposition of law; but Nasau Limited acquired its land (the 89 allotments retained since 7 August 1979) from Soqulu Plantations Limited, which is one and the same entity as Taveuni Estates Limited. The benefit of the covenant in cl (7) of the Deed of 2 June 1995 given by the Bank to Taveuni Estates Limited therefore passed to Nasau Limited if it can be said that that covenant in cl (7) runs with the land. It does so if it satisfies the two requirements specified by Farwell J in Rogers v Hosegood [1900] UKLawRpCh 134; [1900] 2 Ch 388 at 395, which are that (1) the covenantee must have or have had an interest in the land to which the covenant refers; and (2) the covenant must touch and concern the land.

[7] Here the first requirement is satisfied because Taveuni Estates Limited as the covenantee was, as appears from the Deed, the owner of various lots within the subdivision. The second requirement is also satisfied because the covenant in cl (7) of the Deed affected the land as regards its "mode of occupation"; or affected the value of the land per se and not merely from "collateral circumstances": Rogers v Hosegood, at 395. Plainly both the utility and the value to the owners of lots in the subdivision was and is enhanced by having the right to the exclusive use of the golf course land, and to use it free of charge in perpetuity. It follows that the benefit of the Bank’s covenant with Taveuni Estates Limited enured in favour of Nasau Limited as an owner of lots in the subdivision. As a matter of construction of the covenant in question and the surrounding circumstances (Rogers v Hosegood, at 396), it was clearly intended to do so. The intention evidently was to annex the restrictive covenant to the land. It is restrictive of the Bank’s rights to use, deal with or dispose of the land free from the covenant.

[8] If the benefit of the covenant in cl (7) ran with the land, then, as Rogers v Hosegood (at 408) also shows, it did so automatically and forthwith upon conveyance and transfer or "assignment" of any individual lot. As Collins LJ said in that case (at 407), the authorities establish that:

"... when the benefit has been once clearly annexed to one piece of land, it passes by assignment of that land, and may be said to run with it, in contemplation as well of equity as of law, without proof of special bargain or representation on the assignment. In such a case it runs, not because the conscience of either party is affected, but because the purchaser has bought something which inhered in or was annexed to the land bought."

See also Osborne v Bradley [1903] UKLawRpCh 88; [1903] 2 Ch 446, at 450; Baalman, The Torrens System in New South Wales (2nd ed), at 437.

[9] At the very least, therefore, Nasau Limited as proprietor of another lot or lots in the subdivision had and has an equitable interest in the land contained in CT 28574 (the golf course land) to restrain its being used in a manner inconsistent with cl (7) of the Deed of 2 June 1995. It was and is a restrictive covenant in what is sometimes called a "development scheme" capable of being enforced by Nasau Limited and other lot owners against the Bank as covenantor. Being an equitable interest in that land, Nasau Limited was entitled to lodge a caveat in respect of it in order to protect its equitable interest.

[10] Section 107 of the Land Transfer Act Cap 131 provides that a caveat shall, among other particulars, "state with sufficient certainty the nature of the estate or interest claimed and how such interest is derived." The caveat No. 551370A lodged on 28 September 2004 claims "an interest as a beneficiary by virtue of a Deed of Conveyance dated 2nd June 1995 between" the Bank and Taveuni Estates Limited in land described as CT 28574. The Bank complains that this does not state with particularity what that interest is or how it is derived. It could no doubt have been described with greater sophistication. But we think the meaning and effect are clear enough. The caveator Nasau Limited is claiming an interest as beneficiary (which suggests that the interest claimed is beneficial or equitable) that is said to be derived from or "by virtue of" the Deed of Conveyance dated 2 June 1995 between the Bank and Taveuni Estates Ltd. It would no doubt have been possible for the caveat to have added that the interest claimed arose by virtue of the restrictive covenant in cl (7) of the Deed; but the Deed or the covenant in cl (7) is, relatively speaking, so brief that it does not require much to focus attention on that provision in it as the source of the right claimed to support the caveat. The same in our opinion is true of the Bank’s complaint that the caveat does not specify how the interest of Nasau Limited came to be derived. What s.107 calls for is not a detailed history, but a statement of the source of the right claimed. Here it is by virtue of the Deed of Covenant. We conclude that the statement in this caveat is sufficient for that purpose.

[11] The further objection is made by the Bank that this caveat No. 551370A was the second of its kind to be lodged against the land contained in CT 28574 (the golf course land), the first (which was caveat No.4419430) having been removed and discharged by the Registrar on 2 November 2001 under s.110 of the Land Transfer Act. Section 112 of the Act provides:

"112. When any caveat has been removed under the provisions of section 109 or 110, it shall not be lawful for the Registrar to receive any second caveat affecting the same land, estate or interest by the same person, or in the same right and for the same cause, except by the order of the court."

To this, the response of Nasau Limited is that its caveat 551370A was not "in the same right" or "for the same cause" as that or those in caveat 441943.

[12] Before considering this submission, it is relevant to remark that s.112 incorporates what are in effect two distinct prohibitions. One is that the same person is not to lodge another caveat against the same land; the other that no other person is to lodge a further or second caveat in respect of that land if that person relies upon the same right and same cause as the person who lodged the first caveat that has been removed. This is the effect of the interpretation adopted by Chilwell J of the corresponding section 148 of the New Zealand Land Transfer Act 1952 in Bilger v Auckland District Land Register [1978] NZHC 134; (1978) 1 NZCPR 30, 31-32. See also Wigglesworth v Mitri (1979) 1 NZCPR. With respect, we agree with his Honour’s interpretation. It follows that the fact that the first caveat was lodged by Taveuni Estates Limited and the second by Nasau Limited is not a complete answer to the Bank’s reliance on s.112.

[13] The question then becomes one of whether under s.112 the second caveat (by Nasau Limited) was lodged "in the same right and for the same cause" as the first caveat by Taveuni Estates Limited. In that first caveat 4419430 the interest claimed is "an estate or interest as Estate Management Service Operator and Transferor"; and its derivation is stated to be "by virtue of certain provisions contained in the Deed of Conveyance dated 2nd June 1995 between it and the .... Caveator as Transferee in the land", which includes the golf course land in CT 28574. Whatever the description "Estate Management Service Operator" embraces, it is not a status that confers any recognized interest at law or in equity in land, and we have not been furnished with any means of knowing precisely what it signifies in this context. To that extent, the caveat failed to satisfy the requirements of s 107 of the Land Transfer Act. It could, if at all, have survived a challenge under that section or s.109 only because Taveuni Estates Limited is the "Transferor" under cl (7) of the deed dated 2 June 1995.

[14] As an immediate party to the Deed, Taveuni Estates Limited was and is entitled to enforce the Deed against the Bank in the capacity of a contracting party to it. It is not clear to us, however, that in law its status merely as a contracting party conferred on Taveuni Estates Limited an equitable interest in the golf course land sufficient to have sustained caveat 4419430. We do not think it did. But whether or not it did, the interest claimed in that caveat 4419430 was as "Transferor by virtue of certain provisions contained in" the Deed of Conveyance dated 2 June 1995 "between it and the ... Caveatee as Transferor" in the land including the golf course land in CT 28574. The only relevant provisions in that Deed are those in cl (7) by which the Bank covenants that the golf course land will remain available for the exclusive use of lot owners in the subdivision. This, in our opinion, means that it is an interest in the same land as that claimed by Nasau Limited in caveat 551370A lodged on 6 May 1998. It does not follow, however, that, within the meaning of s.112 of the Act, caveat No.5519370A lodged on 28 September 2004 was a second caveat affecting the same land or interest "in the same right and for the same cause" as caveat No.4419430 lodged in respect of the golf course land on 2 May 1998, or that it contravened the prohibition in s.112.

[15] The caveat No. 551370A lodged by Nasau Limited was not lodged, as was the first caveat by Taveuni Estates Ltd, as "Estate Management Service Operator" under the Deed of Conveyance, but was lodged as the beneficiary, or equitable proprietor, by virtue of cl (7) of that Deed. It therefore appears to us not to have been lodged "in the same right and for the same cause" as the first caveat 4419430 by Taveuni Estates Limited. Although both caveats rely on the same Deed they do not do so for the same reason or in the same capacity. It follows in our opinion that the prohibition in s.112 was not offended by caveat 5519370A lodged by Nasau Limited on 6 May 1998, and that caveat should not be removed. Furthermore, Nasau Limited and Taveuni Estates Ltd are in law two different entities whether or not, as the appellant asserts, they have directors or shareholders in common.

[16] There are some other matters to which we must advert before turning to the order to be made in this matter. The record contains a letter dated 30 November 1998 from the then chief manager of the bank to Mr Stinson of Taveuni Estates Limited. It acknowledges that the Bank signed the Deed dated 2 June 1995 and that it has "no intention of doing other than comply with the requirements therein particularly clauses 6, 7 and 8." The letter is exhibited to the affidavit of Mr Pieters of Nasau Limited, sworn on 28 March 2006 in the proceedings to remove caveat 5519370A. Mr Pieters in his affidavit deposes that it was in reliance on the assurance, or "undertaking" as he describes it, given by the Bank in that letter that Nasau Limited refrained from applying for an extension of caveat 441943. For the Bank now to renege on that assurance, as indeed it appears to be doing, is, if the assertion by Mr Pieters is accepted, capable of giving rise to a distinct estoppel, or else a form of fraud, equitable or otherwise, resembling that recognized by the Privy Council in Loke Yew v Port Swettenham Rubber Co Ltd [1913] UKLawRpAC 11; [1913] AC 491. No reliance was, however, placed in caveat 5519370A on the letter dated 30 November 1998 as the basis for lodging or maintaining caveat No.551370A.

[17] If the Bank were now to transfer the golf course land to a purchaser who succeeded in being registered as proprietor of it, the effect in law would be to extinguish Nasau Limited’s beneficial or equitable interest in the golf course land that was created by cl (7) of the Deed dated 2 June 1995. That is because, subject to exceptions, the consequence under ss 39 and 40 of the Land Transfer Act is to render the transferee purchaser’s registered title indefeasible and free from unregistered equitable interests in the land. One of those exceptions is where there has been fraud within the meaning of s.39, as in Loke Yew v Port Swettenham Rubber Co Ltd [1913] UKLawRpAC 11; [1913] AC 491. Another is where the equitable interest has been created by the registered proprietor himself: see Frazer v Walker [1967] 1 AC 569, 585. The assurance given by the Bank in its letter dated 30 November 1998 is, if it is not honoured by the Bank, capable of attracting either or both of these exceptions.

[18] For reasons we have given in para [15] we have already concluded that the second caveat that was lodged by Nasau Limited should not be removed but should be permitted to remain. In case we are wrong about this as a matter of law, we should explain briefly why we would as a matter of discretion not order that second caveat should be removed in this instance.

[19] Ordinarily we would expect that lodging a second caveat in contravention of s.112 would lead to removal of that caveat, leaving the caveator to apply to Court for an interlocutory injunction against the caveatee restraining him from transferring the land the subject of the caveat. There is in fact an action No 543 of 2004 in being in the High Court between the Bank as plaintiff and Taveuni Estates Limited as one of the defendents. In it Taveuni Estates Limited has counterclaimed for relief in respect of various parcels of land in the subdivision. However, neither those parcels nor the relief claimed specifically extends to the land in CT 28754 (the golf course land) and no injunction is sought in that action in respect of it or its transfer. It would therefore be necessary for Nasau Limited to institute separate proceedings claiming such relief against the Bank or to amend its counterclaim. In the meantime, if the caveat were to be removed, a transfer of that land might be registered in favour of a purchaser having the effect of extinguishing any beneficial or equitable interest in he land unless Nasau Limited succeeded in bringing itself within one or both of the exceptions we have referred to. Nasau Limited has, as we have already mentioned, itself now commenced a civil action No.209 of 2006 claiming relief against the Bank in reliance on cl(7) of the Deed of Conveyance of 2 June 1995. This action does not, however, claim an injunction against the transfer of that land by the Bank. It would, of course, be possible for Nasau limited to amend its statement of claim in that action to claim such an injunction. In the meantime, however, if caveat 551370A were to be removed, a transfer of the golf course land might immediately be registered having the effect of extinguishing the beneficial or equitable interest in that land arising under cl.(7) unless Nasau Limited succeeded in bringing itself within either of the exceptions to indefeasibility that we have previously referred to.

[20] We do not consider that Nasau Limited should be subjected to the risk that its equitable interest in the golf course land may be extinguished in this way. The prohibition in s.112 against a second caveat is not absolute, but is subject to an express exception in s.112 permitting it "by order of the court." This confers a judicial discretion which, although as was said in Muellner v Montagnat [1986] NZHC 19; (1986) 2 NZCPR 520 it is unfettered, ought to be carefully considered before being exercised in favour of allowing the caveat to remain. Here, however, we consider that it will conduce to speedier, safer and more satisfactory resolution of the parties’ rights if the caveat No.551370A were permitted to remain rather than that Nasau Limited should now be left to claim an interlocutory injunction to restrain sale to a purchaser of the golf course land in CT 28574 and the registration of a transfer of it. The prospect of its successfully establishing one of the two exceptions to indefeasibility is a factor that weighs with us in exercising that discretion in its favour.

[21] This is essentially the result arrived at by the learned Judge in the court below. We respectfully agree with it and will therefore dismiss the appeal with costs fixed at $750.00. We would also dismiss the respondent’s cross-appeal, but we make no order for costs in respect of it.

Ellis, JA
Penlington, JA
McPherson, JA

Solicitors:
Mishra Prakash and Associates, Ba for the Appellant
Cromptons, Suva for the Respondent